For the past three years, Burlington mistakenly collected $306,226 in state taxes, according to a memo from City Attorney Eileen Blackwood addressed to city councilors. The money, which was supposed to go to the state, was paid back.

The money was collected from the downtown tax increment financing district (TIF), which was approved in 2011. When the city assessor filled out an annual state tax form, he incorrectly marked the district as active — at the time it was merely approved by the state — triggering the redirection of tax money to the city when it should have continued going to the state.

TIF is a way for governments to fund development where private builders might otherwise avoid spending money. A TIF district works by redirecting state property taxes to the public improvement project. For example, the new Burlington Waterfront Marina project is drawing some of its funding from TIF money.

The money sat unused, however, because the city made budgets without knowing they had an extra $306,226 in the bank. Eventually, state tax officials sent a letter to the city, saying they noticed a shortfall in Burlington's state taxes.

State and Burlington officials hashed it out and chalked the problem up to a clerical error. They have since developed safety systems so this can't happen again, said Fred Kenney, executive director of the Economic Progress Council.

"If a municipality has a TIF district, it separates them out and requires them to fill out a separate form," he said. "Now, the municipality will have to get sign-offs from the Department of Taxes if they say a TIF district has been activated."

There are eight other TIF districts in the state, all of which have been activated except for South Burlington's.

This article was first posted online June 28, 2016. Contact Cory Dawson at the office (802) 651-4826, on his cell (802) 338-0316 or via email at cdawson2@freepressmedia.com. Follow him on Twitter at @Dawson_and_Co

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